LivingInPike.com

According to Lawrence Yun, Chief Economist at the National Association of Realtors, “For every listing there are 5.1 offers. Half of the homes are being sold above list price.”

It takes some real thought and desires to win in a bidding war. Knowing your options is key. There are many things that you can do to make your offer stand out.

1.) First realize that if you are getting a mortgage, the lender will only allow the loan amount to be up to the appraised amount. That means that if you offer more than the appraised amount, you will have to come up with the difference. If you have the extra cash, then this should not be a problem. If you don’t, then you could negotiate and see if the owner would take the appraised amount. Another solution would be to offer a price but then in the “Further Conditions” in the Purchase Agreement, write something like “if the home appraises under offer price, then the buyer will pay up to appraised amount”. This would eliminate any question as to what you would be willing to pay and eliminate negotiations after appraisal.

2.) Don’t request any appliances even if the seller is willing to leave them. This would show the seller that you are willing to buy the house without the appliances. The seller might like the fact that they could take some/all appliances with them.

3.) The earnest money was designed to show the seller how interested you were in buying the house. The bigger the earnest money, the more you want the house. It also shows that you are willing to put skin in the game. Larger amounts of earnest money could make a difference.

4.) How you finance the home and what your down payment is can be critical. Basically, there are 3 types of loans. FHA, insured conventional and conventional. If you have a down payment of less than 20 percent, then the lender will add a Private Mortgage Insurance policy to the loan. FHA appraisals are always a little more demanding. This could be a little more challenging for the seller if their home is not up to par. Bigger down payments do have one advantage when it comes to appraisals. Example: Buyer offers $200,000 on a house. They put down 10 percent as a down payment. Now house only has to appraise for $180,000 because that is all the loan would have to be. This could be a big concern for sellers if the house does not appraise. Having a bigger down payment could give the seller some relief.

5.) Don’t ask the seller for any closing costs. This might be the only way a buyer could afford the house but you are taking money out of the seller’s pocket.

6.) Work with the seller on a closing date. A buyer’s agent could call the listing agent and ask what would work best for the seller. The seller might need time to close on their next house or might want to close as soon as possible.

7.) Traditionally the closing fee (the fee charged to have the table closing by the title company) is split between the buyer and seller. The fee usually is around a total of $300 to $400. The seller will pay more attention and appreciate the offer if the buyer pays the sellers half of the fee.

8.) In this market, possession of the new property can make or break a deal. Traditionally, possession was always at closing. Now, giving the seller days, weeks, or a month to vacate the house has become more of the norm. This protects the seller from having to move out before closing. It is possible (and happens many times) that the buyer can’t get the loan but does not find out until a day or two before closing. Maybe the seller has bought a new house and has moved into it. Now the seller has to face two mortgages until they can find a new buyer for the old house. Giving the seller extra time to vacate is a huge plus.

9.) Either waving the right to have a home inspection, taking the property as-is, or using the “AS IS” ADDENDUM TO PURCHASE AGREEMENT is a benefit to the seller. This allows the buyer to have an inspection, terminate the transaction if any undisclosed defects were found in the inspection. The seller has no obligation whatsoever to correct the defects found in the inspection. This protects the seller from any inspection repair expense. Normally this would work well if the house is in good condition and has no defects and needs no repairs.

10.) Don’t ask the seller to pay for a home warranty for the buyer. This is an added expense for the seller. The buyer can order and pay for a home warranty any time after the closing for the same price.

11.) The buyer could pay for the seller’s title insurance policy. This cost could vary based on the price of the house. This could mean a lot to the seller.

12.) Because Indiana property taxes are paid in arrears, the bills you get this year in May and November pay for the first 6 months of last year and the last 6 months of last year. The seller owes the buyer a credit at closing based on what the last payment covered to the closing date. The title company prorates it and gives the buyer a credit and the seller a debit on the closing statement. Otherwise, the buyer would be paying the seller’s property taxes from their escrowed mortgage payments. The buyer could relinquish the credit or part of it which would save the seller some money. These tips are ways to influence the seller in a multiple offer situation. The whole idea is to reduce the seller’s costs and inconvenience. The more tips you can use the more likely you are to get the seller’s attention and maybe win the bidding war. When I represent the seller in a multiple offer situation, I start an Excel spreadsheet with all the variable contingencies. This makes it easier for the seller and me to decide which the best offers are. The last multiple offers I did this to had 9 offers. The one before that had 15 offers. It’s a seller’s market.

DISCLOSURE – You should be careful about waiving the inspection. As a licensed Real Estate Agent, we have a fiduciary responsibility to educate our buyers of the importance and benefits of an inspection. And, as a Realtor, the Code of Ethics states that we make sure that any known issues are still disclosed. There are benefits and liabilities to each of these above tips. Make sure you understand them before you use them.

Tim Lord

Due to the 2020 COVID disruption, I thought it would be a slow year. I was wrong. It turned out to be a very good year for real estate. Sales were up about 7 percent over 2019. Inventory (houses for sale) was EXTREMELY low making prices go through the roof. (no pun intended) Today there are 17 houses for sale in Pike. That is a long way from over 1000 houses on the market ten years ago. The interesting variable is that there are a ton of buyers looking for homes. When good houses at fair prices go on the market, there is instant activity. Numerous showings, multiple offers, and quick sales.

Recently I listed a house in Pike, and I had 36 scheduled showings, 9 offers and the seller accepted an offer in 24 hours. One of the offers was $23,500 over the list price. During the first 24 hours, my texting and phone calls about the property were non-stop. Realtors wanted to know what it would take in an offer to get their buyer’s offer accepted. Half of the communications were asking me if I had any offers on the property yet. And no, the seller did not take the high offer. I find that not too many Realtors think about the appraisal when pricing a property. Lenders will only lend to the appraised amount. You may think that you are doing your seller a great service when getting a much higher price than the list price but, if it does not appraise the buyer and seller have one of three choices. Either the seller has to reduce his price to the appraisal amount, the seller could reduce his price by some amount and the buyer would have to come up with cash to get to the reduced amount, or the sale gets terminated. It is best when the listing Realtor can come up with a fair market value and the seller accepts it.

BLC (Broker Listing Cooperative)
MIBOR (Metropolitan Indianapolis Board of Realtors) has a database of houses for sale which in most states is called an MLS (Multi Listing System). MIBOR calls theirs BLC (Broker Listing Cooperative). When you become a member of MIBOR you get access to the BLC. To become a member of MIBOR, you must be licensed, and pay yearly membership fees. Technically, MLS’s were created so that real estate brokerages could share commission fees between listing and buyer agents. So, it means that just because a house is listed with another brokerage firm, your buyer’s agent can still sell it to you.

I ran across this with my neighbor. He was a real estate investor. I had shown him homes and he had made offers but they were never accepted. A condo in my neighborhood when up for sale and it was listed with a big-name brokerage. He went directly to the listing agent and bought it. After the fact, I asked him why he did not let me sell it to him. His answer was “It was not listed with your brokerage.” Needless to say, I was disappointed that he did not understand real estate protocols.

Bankruptcy’s
I got hooked up with a Department of Justice bankruptcy Trustee attorney about 4.5 years ago. He sends me property addresses and who to get in contact with to see the properties. Rarely do I meet the owner and the properties are mostly vacant. I tour the property and put together a report as to what I think the property is worth on the market today. He decides if he wants me to list it. Most of these properties have very little “wiggle room” to break even when sold. Most are short sales (another story, another time).
In bankruptcy, the Trustee’s job is to decide what to do with your house (if you own one). He makes all the decisions and signs all my legal documents. I treat him like the owner of the property.

I get calls all the time when I list a bankruptcy property. The Realtors want to know the procedure. It is like a traditional sale, only it must be approved by a bankruptcy judge. This will take about 30 days after we have a buyer and Trustee signed purchase agreement contract. Judge signing is pretty much routine.
Since there is very little “wiggle room” in bankruptcies, I have been known to have to discount my brokerage commission to get the sale done. Sometimes everyone involved in the transaction will discount their fees in order to close the deal. You may think that Realtors never have to do that. Well, you are wrong. Years ago, a listing agent and I bought a radon unit and had it installed in a house so we could close a deal. I have known several Realtors that have bought refrigerators in order to close a deal. One of my agents is having carpets cleaned in order to close a deal. Happens all the time.

Quick Claim Deeds
When you close at a title company and use and pay for their services, your transaction is insured. It may cost you several hundred dollars more, but it is worth the money. If the title company misses something in their research, they are liable. I had a sale once where the title company missed a homeowner’s dues fee of $2,500 that the seller owed. After some negotiations, the title company paid the missed fees. These fees could be property taxes, vendor liens, anything the has to do with the house. These items must be cleared before a house can sell.
Quick claim deeds are different. It allows you to sign one document, exchange money, have the deed recorded and you are done. If it sounds easy, it is BUT the aftereffects can be disastrous. There is no research done on the property. It may have unpaid liens, homeowner’s fees, etc. Since those are not cleared before the sale, the buyer is now liable.
Also, since property taxes are paid in arrears, (property taxes that you pay today are for last year) some adjustments must be made at closing. Since the seller owned the property last year, they should pay the property taxes for that time period. If no adjustment is made, the new owner will pay the property taxes for the last owner. Traditionally in an insured closing, the seller gives a property tax credit to the buyer.

Conclusion
Behind the scenes in real estate, there are many things that the average buyer and seller may not think about or even know about. I am a big proponent of real estate education. I find the more buyers and sellers know about the transaction the more they can make the right choices and the happier they will be.

Note: I am not an attorney, and this is not legal advice. I only speak from my experiences.

I suppose this could not have happened at a more appropriate time. The building in which I had my office suite had a fire on Nov. 30th, 2019. Although the fire was only in one suite on the second floor the smoke and water damage in the building was EXTREME. All 22 tenants in the building had to vacate the building while it was going to be rehabbed. The estimated return date is Nov. 30th, 2020.

I decided that I would not find another office space and work out of my home. I had done this before between 2014 and 2016, my last three years with a major brokerage before becoming independent and starting my own brokerage. Without a lease, this lowered my cost of doing business.

I had started meeting with my agents once a week at a Starbucks. This worked well until the coronavirus changed everything. Fortunately, on March 23rd real estate services were considered an essential business on the governor’s executive order. It also required social distancing. WAIT, WHAT? Real estate is a relationship type of business. It requires meeting belly to belly with people and talking about their real estate concerns and challenges. How would this be possible? My Starbucks closed, so I could not meet with my agents.

I was planning to take a trip to California to visit my son, his wife, and my turning 3-year-old granddaughter in March. That got canceled. My son suggested that we do a video call on an app called Duo. That happened and I was quite impressed. I got to see my granddaughter, talk to her, and see what new toys she was interested in. I believe communications are enhanced when you can see someone’s face and body language. I thought this might work for real estate. I started having Zoom calls with one of my agents. It was very productive. I could show her computer screens, programs, marketing materials and show her how to do certain things on the computer. But, would this work for customers?

Normally when I list a house I must see it, and not just the outside. I need to tour the house. A good Realtor can tell a lot by just walking through a house. The last time I listed a house and was not able to go inside, I got burned. The assumption is that it is a normal/average house. I priced it as such. Once I got inside, I could not believe what I saw. The owner had a meth habit. Windows had been boarded up from the inside among other things. The house had not been taken care of. I had priced it two times higher than what it should have been. I will never list a house again without touring it.

On April 20th, 2020 the governor updated his executive order. It states that real estate services should be conducted virtually or by telephone whenever reasonably possible, and any professional services requiring face-to-face encounters should be postponed unless the failure to meet in-person will have a significant adverse impact on the client’s financial or legal position. WAIT! Isn’t that what real estate is all about? A client’s financial and/or legal position?

So how was this coronavirus thing going to affect the real estate business? I started reading trade reports and Facebook trade groups on how other Realtors across the nation were doing business. It seems that 1 in 4 buyers will buy a house without touring it. WOW! I read that sellers were not willing to list their houses during the pandemic because they were afraid that buyers would tour their houses and steal their toilet paper and hand sanitizer. Open houses were being done virtually either by buyers watching a video or listing agent showing the house on Zoom and touring the house and talking with the buyers and their agent at the same time. I learned many years ago that you do what the seller wants you to do as long it is legal and ethical. I was ready for the challenge.

In 2007, a Zionsville investor found me on the internet. Over the past 13 years, I have bought and sold 8 homes for him. He called me in March and wanted me to sell one of his rentals in Pike. He wanted to know what it was worth. He was going to rehab it and it would be ready to list by the end of April. Knowing how he rehabbed a house, he was every Realtor’s dream. I came up with a home value for him. It was not set in stone and I would have to see the house after rehab for a final value.

On April 29 I got to see the final product. I was impressed. A very nice 3 bedroom two story with new carpet and paint. It had a very traditional floorplan. I listed it that day. I asked him how he wanted showings to be arranged. Indiana Association of Realtors had just come out with new documents for listings and showings during the pandemic. Basically they were disclosures on how the seller wanted showings and a document that all buyers had to sign in order to tour the house. It asked that buyers take “reasonable precautions” and if someone in the visiting party is diagnosed with a confirmed case of COVID-19, or if a visiting party or any person visiting the property with visiting party has had direct contact within the past 14 days with an individual with a confirmed case of COVID-19, the undersigned agrees to immediately inform Broker.

I am not an attorney! Healthline.com says that 25 to 50 percent of people with COVID-19 are unaware they have the virus. They also said that people with no symptoms are the source of 44 percent of diagnosed COVID-19 cases. It seems to me that we are probably in direct contact with people who have COVID-19 and are not even aware of it. Would these documents help? Would a visiting party touring the house even know that they have COVID-19? It seems to me the only solution to the virus is to be quarantined to your own residence for 3 or 4 weeks and not be in direct contact with anyone.

Back to real estate…after going through the documents with my seller, he said “I want to make showings as easy as possible. They don’t need to sign the disclosure.” Fine. In the next 8 days, I had 23 showings and 5 offers. Again, a Realtor’s dream. An offer was accepted and we close in June.

Not only are Realtors changing the way they do business, but title companies also jumped in as well. I see some title companies are doing closings where the buyer and seller are in separate rooms. I also read where one title company will do an “at the curb car closing”. You never have to leave your car. Remote closings, where you close in a different city or state with a notary have become common. Notaries are a must at all closings. You have to prove to them who you are and they notarize all signed documents. Originally, virtual notarization was to become legal in Indiana as of July 1st. That means that you could close on a home over the internet. Because of the pandemic, the governor moved it up. The title companies are working as fast as they can to make this happen. Now that is what I call social distancing.

I did absolutely no marketing for the house. This just goes to show you that we still have a strong market during the pandemic. With only 60 houses in Pike on the market, it is definitely a seller’s market. A balanced market in Pike would be about 500 homes for sale.

It will be interesting to see how real estate and this pandemic play out.